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24 July, 2024
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Applications open for 'Rent in Exchange' program

Loan cancellation and future ownership possibilities

Newsroom / CNA

"The submission of applications for the 'Rent in Exchange for Installment' program will begin in October," said Ioanna Markidou, Chief Economist A' at the Ministry of Finance, in a statement to CNA. She clarified that the applications will be addressed to KEDEPES, and the process will be simple, without much bureaucracy.

The program is expected to cover around 2,500 households. The first category that the program covers includes all recipients of benefits: recipients of the Guaranteed Minimum Income, single-parent families, large families, low-income pensioners, recipients of disability pensions, and individuals with disabilities. The second category includes all applicants of the ESTIA and OIKIA programs, who were assessed as non-viable, as well as those who joined ESTIA but could not meet the payment program and their inclusion in the program, was terminated.

An additional criterion is that the value of the residence must be up to €250,000, except for ESTIA applicants, who, because they come from another program, can have a residence value of up to €350,000.

Presenting the main aspects of the program, Ms. Markidou mentioned that borrowers who choose to participate in the program will be able to remain in their primary residence, but their status will change from owners to tenants. KEDEPES, the implementing body of the program, will purchase the primary residence, which secures the housing loan, at 65% of its market value, following an appraisal. The amount will be given to the creditor, who, in turn, will cancel the loan, which will no longer be required, while the primary residence will be transferred to KEDEPES.

Responding to a question, Ms. Markidou clarified that in the rare case where 65% of the market value of the property exceeds the loan amount, the bank will take the total loan amount, and the remaining amount will be paid to the former owner.

Furthermore, at the time of transferring the property to the Land Registry, the lease agreement will be signed between KEDEPES and the former owner to ensure their residence. "Although it is a rental status, and a lease agreement is signed, the state will fully cover the rent on behalf of individuals," stated Ms. Markidou, clarifying that the lease agreement has a duration of 14 years, during which the state will cover the entire rent.

"We want people to buy back their homes if they can," she noted, stating that after 5 years from the signing of the lease agreement, the former owner or first-degree relatives will be able to repurchase the property. She clarified that the repurchase price will be very favorable, as it will be the purchase price at which KEDEPES acquired it, plus some administrative expenses.

She noted that when interested parties submit their application for inclusion in the program, a tool will be created in which they can enter a hypothetical price for the property and see at what price they will be able to repurchase it after five years or later. "So, anyone who wants to explore it will know from the beginning what the price they have to pay if they want to buy it back," she said.

Ms. Markidou emphasized that the program will be promoted to attract interest from all creditors, credit institutions, debt management and acquisition companies, in September. She clarified that the creditor must express interest for an application to be valid. "If the creditor does not want to participate in the program, an application will not be accepted," she stated.

When asked to comment on the possibility that debt acquisition companies may have purchased the loan at a lower price than the nominal value and may have significant profit margins from the program, Ms. Markidou said that these companies have purchased loans and will receive compensation for their security. Generally, she noted, the loan amount is higher than the collateral value, as they are Non-Performing Loans. The fact that they receive only 2/3 of the property value, and the remaining amount is no longer required, is a burden that the creditor assumes.

Reiterating the advantages of the program, Ms. Markidou mentioned the loan cancellation, the fact that the rent is paid by the state, and the opportunity to repurchase the property at a more manageable price. Applications will be made to KEDEPES from October, either in person or by mail, and the process is simple, short, and requires very few documents, she pointed out.

[This article was translated from its Greek original]

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